Educating Your Kids About Finances

Did you know that when it comes to teaching our kids about money, we may be doing it all wrong? Here's what you should be teaching them instead.

In an effort prepare the next generation for making better personal finance decisions, schools are starting to address financial education in their curriculum (source). In general though, schools have been slow to adopt personal finance as a top priority with only 2 additional states since 2014 adopting personal finance standards in their K-12 programs. While more states are implementing standards in personal finance, the number of states that require high school students to take a course in personal finance remains unchanged since 2014 – just 17 states (source).

Despite efforts being made on the part of educators, children are still growing up and making the same financial blunders their parents made. Just look at all the young people in debt. According to a study reported in Time Magazine, more than 75 percent of late teens and early 20-somethings who rent spend more than they earn each month! The study reports that, to keep up with their expenses, young people are financing everything with credit cards- the worst kind of debt you can have because of high interest rates.

More needs to be done beyond financial literacy to help prepare our youth to make good financial decisions in real life. It starts at home and it involves real-like application of financial concepts and healthy money behaviors.

What Can You Do?

As a parent, you can help your child avoid this scenario later in life by teaching a few core principles... and teaching them the right way. Here are the basics of "finance for kids" that you can work on at home.

1. It's never too early to start. In a study done in the UK, it was found that our money habits may be formed as early as age seven! Not only that, but some researchers say that even toddlers can comprehend the very basic concepts of saving. Why not go with your child to open his first savings account when he is young. This way you can teach your son or daughter how to save first and spend what is left. This is a great and simple exercise that helps your child start a lifelong healthy financial habit.

2. Teach Gratification Delay. This is a general life concept that holds wonderfully true in financial scenarios, too. "If you want something, sometimes you have to wait!" Delaying gratification is a useful skill in almost any role in life, and has even been linked to success in adulthood... that's overall success, not just success in making financial decisions.

3. Teach goal-setting. This, like the tip above, can be taught to a preschooler. Having goals works in any area of life, not just finances, but in money matters it's particularly useful and effective. An idea for a child's goal might be a new toy. You'll probably have to set up an allowance for your child so he or she has a way to reach the goal. Have them add money to the pot and monitor their progress towards the goal. It's fun for everyone.

4. Teach timeliness. There's not really a metaphor for this one except health care. The sooner you start taking care of your health, the larger the reward you'll reap later on. As for finances, it's all about compound interest (we'll let you figure out the healthcare parallel!). Kids can start comprehending this concept around age 12, which is when they start to really be able to wrap their heads around long-term goals.

5. Show examples of real-life informed financial decisions. The supermarket is ripe for teaching opportunities. Explaining your reasoning for choosing one type of cereal over another can lead to a conversation about sugar... or it can lead to a conversation about generics vs brand names and value. You decide! Just don't combine both lessons in one day or your son or daughter will never want to go grocery shopping again.


Whatever it is, teach it at the appropriate time. One of the reasons researchers think school finance classes aren't working is because they're teaching lessons whose practical applications are years in the future. Teach your lessons at home shortly before or after your child is about to encounter the issue in real life. The lessons will sink in much deeper that way!